[NEWS] 090805 TVXQ Suit Beats Down Agency’s Stock

The share price of S.M. Entertainment, one of Korea’s most well-known talent agencies, dove for four straight days after members of its flagship boy band TVXQ filed a lawsuit against the company for what they called an unfair contract.

Three members of the five-member pop group, which helped bring the agency overseas sales of more than 10 billion won ($8.2 million) last year, claimed they were forced to sign a contract lasting for more than 10 years with little room for pay negotiation.

The firm’s stock, listed on the junior Kosdaq market with a total market value of 58.3 billion won, shed 3.07 percent to close at 3,625 won yesterday, the fourth straight day of declines and down nearly 20 percent since July 31, when news of the lawsuit broke.

The complainants, Micky, Xiah and Hero, formally filed suit against S.M. Entertainment on Friday to annul their contract. Two other members, Max and U-Know, declined to join in. The former three had already expressed frustration with what they called an unfairly long contract that calls for an overwhelming work schedule and unclear terms on how profits would be shared. The company said in a statement Saturday it would “deal with the issue” in a timely manner.

“About 27.5 percent of the sales of S.M. Entertainment come from overseas, and TVXQ earns a large portion of it,” said Kim Chang-kwon, analyst at Daewoo Securities. TVXQ is one of the firm’s five most popular franchises along with BoA, Girls’ Generation, Super Junior and Shinee. “A problem in one of the five franchises will inevitably hurt the firm’s share price.”